The macroeconomic effects of funding U.S. infrastructure

Jim Malley and Apostolis Philippopoulos

European Economic Review, 2023, vol. 152, issue C

Abstract: This paper quantitatively assesses the macroeconomic effects of the recently agreed U.S. bipartisan infrastructure spending bill in a general equilibrium model with a mix of neoclassical and new-Keynesian features. We add to the relevant literature by allowing for a more detailed tax structure, different types of infrastructure spending and linkages between the final and intermediate goods sectors. We find long-run output multipliers above unity if the rising public debt, triggered by the increase in infrastructure spending, is stabilised by rises in consumption, dividend and labour income taxes and less than unity for corporate taxes. We also find that self-financing rates associated with infrastructure spending are not generally above 50% despite underprovided private and particularly public capital. Finally, a sensitivity analysis reveals that intersectoral linkages and zero-interest rate policy are critical determinants of multiplier size.

Keywords: Infrastructure investment; Public capital; Fiscal multipliers; Taxation (search for similar items in EconPapers)
JEL-codes: E62 H41 H54 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: The Macroeconomic Effects of Funding U.S. Infrastructure (2022)
Working Paper: The Macroeconomic Effects of Funding U.S. Infrastructure (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:152:y:2023:i:c:s0014292122002148

DOI: 10.1016/j.euroecorev.2022.104334

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